Making Tax Reform Clear

When considering changes to the tax system, Independent Americans need to be the voice of reason. Partisan political perspectives continue to cloud the issue, as those in office and those seeking office have an overriding motive to present solutions that are “simple.” The problem with “simple” solutions is that they don’t exist. The lack of substance in these proposals is easy to see for those who do not cling to political party loyalty above loyalty to our country, and it is the Independent mission to provide “simple” explanations of proposed “simple” solutions.

In the case of taxation, the debate focuses on who pays, how they pay, and the benefits to the economy. The “flat tax” perspective believes in applying an across-the-board tax on goods and services, paid by consumers, and claiming that the economy will be improved by lowered prices relative to the elimination of taxes on business and industry, as well as increased investment in expansion and job creation. The “income tax” perspective believes in applying an incremented rate of taxation on all personal and business income, claiming to improve the economy by distributing the tax burden proportionally and offering credits and/or exemptions to businesses and individuals who spend money on things deemed beneficial to society, such as providing jobs to disadvantaged people, or donating to charitable organizations that provide help to the disadvantaged.

Each side claims that the other will harm the economy, or is “unfair,” usually according to party platform. The right-wing, conservative side leans toward plans that lower and eliminate taxation on wealthier Americans and corporations. The underlying belief is that such taxes “penalize” the hard work and success of those who have earned more money, and that allowing this group to keep more money will prompt them to do more of what they did to get where they are. The left-wing, liberal view is that taxes should be paid proportional to income, i.e. higher incomes pay a higher rate of taxes than lower income levels do. The underlying belief is that this allows for a more equal distribution of wealth, and grows the economy through strengthening the system that allowed the wealthy to become that way, encouraging and helping more people to do more of the types of business building and investing that the wealthy have done.

Is one side right and the other wrong? No. There is logic on both sides that appeals to the Independent-minded. So, what mental heuristics can help the Independent and Undecided sort out the best direction? I.A. has a short list of questions to keep in mind that can help anyone test the soundness of any plan.

1. What drives a country’s economy?
2. What does the plan propose be taxed?
3. Upon which economic force does the tax apply, the driving force or the non-driving force?
4. What effects could taxing this force have on the economy?
5. Would these effects promote growth or stagnation, given that most people take steps to reduce the amount of taxes they pay?

Tax reformers would do best to honestly answer these questions in their proposals. These are the only simple truths that give one plan merit over another. Charts, figures, percentages and arguments steeped in bad logic and appeals to emotion serve only to confuse and deceive. Answers to these questions will quickly help any American cut through the smoke and mirrors, and expose the true intent and merit of any tax plan.

Please share this list with everyone you know when discussing taxes. The economic future of America depends on every American’s understanding of the simple facts that underlie the larger issues. I.A. will remain vigilant in its efforts to contribute to this in every way possible.